Common Sense Investment Strategies:
There are a lot of theories out there regarding investment strategies. Every “expert” has an opinion regarding how you should invest, but there is some common sense advice that can start you on the path of educated investments.
- First of all, start. Start as soon as you can. The hardest part of anything new is getting started -and investing is no different.
If your company offers a 401K plan, then most of the decisions are made for you. Each company gives a limited number of plans that employees can invest in. Take a look at the plans offered, read a quick summary about what stocks and bonds they hold.
Also, some plans are categorized by their management style. Some plans are aggressive – offering more of a return for more risk. Some are stable – offering less returns, but also less volatility. Figure out what kind of investor you are. Are you willing to accept some risk in return for a bigger payout? Or, are you a nervous investor who values stability over higher returns. Only you and your financial advisor know the answer to those questions. But, if you are just starting out, remember you have time on your side. You can take some risks now, knowing that you have the time to balance them out.
- What if you want to purchase stocks outside of your 401K plans? What should you do?
Open an account and talk to an expert. Ask questions and get answers. (There are no such things as “stupid questions” – the only “stupid question” is the one you DON’T ask.) A good financial advisor should ALWAYS WELCOME a discussion.
A good rule is to “buy what you know”. Think about the products that you enjoy and use regularly. Think about the products that your friends and family use regularly. Take a look at the label and see what company owns them. Then do a little research and see how that company is doing overall. Are they making money? Do they provide dividends to shareholders? Do they have a reasonable plan for growth? Take these answers and determine if they are a good investment. If you are unsure about investing in JUST that company, look into the possibility of buying shares in an ETF which holds a percent of that company’s stock.
Many investment beginners look at stocks like Apple, Starbucks, Microsoft, Google, Amazon – because they know and use their products and services almost every day. (This is just an example; we offer no advice regarding the purchase or sale of ANY particular stock.)
Put the time in now to research and evaluate any potential stock purchases, and then make a decision.
- Avoid emotional stock attachment. Look at stocks as a means to an end – a way to gain wealth for a future use. Make decisions regarding stocks WITHOUT EMOTION. For example: Don’t think that if you sell your Disney stock, that means that you HATE Disney. Make an educated decision regarding when to sell and stick to it. If you keep waiting, you will miss out on some potential opportunities. Go with your gut and follow through.
- And above all, DIVERSIFY. Do not put all of your investments in one “basket”. Diversification helps you ride out market fluctuations, with minimal stress.
Give yourself a vote of confidence and get started on a path to financial independence through sound, educated investments!!